Minority Leader advocates on-lending policy

Contract Amendment Bill

The Minority Leader in Parliament, Dr. Cassiel Ato Forson, is advocating a policy to reduce government’s risk in on-lending loan arrangements.

He said a policy that spells out mechanisms to ensure repayment of loans contracted by government for the purpose of on-lending will help reduce the burden on the state having to shoulder responsibility for repaying them in the event of default.

His comments came on the back of a motion for approval of an on-lending agreement between the Government of Ghana (GoG) through the Ministry of Finance and the Agricultural Development Bank (ADB) for an amount of US$7million toward implementation of the Ghana Forest Investment Programme. The loan agreement is between the GoG and International Development Association (IDA) of the World Bank Group.  The money will be given to ADB for onward lending.

The deepening of lending principles, he indicated, will prevent government and the taxpayer from paying debts when lending institutions fail to recover the funds. He said the current status quo is compounding the public debt situation, and therefore needs to be reformed.

In this regard, the Minority Leader called on the Ministry of Finance to submit for approval by parliament a policy for on-lending that spells out mechanisms to ensure repayment of loans contracted by government.

“I believe state agencies and individuals that benefit from loans which the country contracts must be made to repay these loans, so that in future when the time arrives when we have to repay these loans we can have those monies to pay.

“We can avoid the current situation that we are in – not being able to repay our loans; because now we have to go through domestic debt restructuring and external debt restructuring and all of that. I think it is something that we should learn from and deepen the whole lending principles, particularly the policy. Clearly, what’s happening is giving us an opportunity to depart from what we used to do in the past.”

Under the Forest Investment Programme, government intends to on-lend the facility to ADB for further onward lending to beneficiaries.

The financing agreement of US$7million, being additional financing for the programme, was first presented to parliament on 30th November 2022 and referred to the Finance Committee for consideration and report.

According to Dr. Ato Forson, the on-lending facility’s objective is laudable, as it goes to support individuals involved in forestry plantations as well as sustaining forest restoration efforts by government.

“I think it is laudable. That loan was for the purpose of encouraging forestry investments, and so the government of Ghana is giving that loan to individuals engaging in forestry plantations,” he said.

He however added that: “The money must be recovered because those plantations will be sold; and when they’re sold they will make revenue or profit. And so government has a responsibility to ensure that we get the money back”.

In presenting the report, Chairman of the finance committee, Kwaku Agyemang Kwarteng, noted that the committee recommended that government consider lowering the interest rate at which the facility will be extended to the beneficiaries.

The report noted that the committee observed the project seeks to improve forests and the management practices of cocoa farmers, communities and forest reserve managers to reduce forest loss and degradation in high forest zones and transitional zones, while rehabilitating degraded mined-out sites and forest reserves,

Project background

Government, in an effort to slow the rate of deforestation and restore the country’s forest landscape, has implemented a number of interventions. The interventions were funded from dedicated national re-afforestation programmes funded from the national budget, with support from development partners.

To sustain the efforts, the Ghana Forest Investment Programme (GFIP) was operationalised with a US$29.5million grant from the Climate Investment Fund (CIF) which according to the report has proven to be successful.

It is on these grounds that an additional US$7million has been extended by IDA to bring additional impetus to the ongoing efforts.

“The additional funding will also be directed at piloting the viability of contracting commercial loans for plantation development,” the report further said.

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